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June OPEC Meeting: Crude Oil To Hit $65

Published 05/26/2016, 02:21 AM
Updated 03/09/2019, 08:30 AM

Crude oil futures edged closer to $50 a barrel on Wednesday, with the US crude reaching its highest level in more than seven months after industry statistics implied a bigger than expected decline in US crude stockpiles last week.

Oil markets were also backed by an overnight rally in US equities and robust home sales that could acquaint to the Federal Reserve increasing interest rates as early as next month.

West Texas Intermediate crude for June delivery rose 1.36 percent to $49.28 a barrel on the New York Mercantile Exchange, while Brent crude jumped 1.19 percent to $49.19 a barrel.

Market analysts currently see the Brent crude hitting $50 a barrel in the third quarter of 2016, before soaring to nearly $65 a barrel by the end of next year.

According to the American Petroleum Institute, crude oil inventory was reduced by 5.137 million barrels in the previous week, compared to a drop of 3.3 million barrels expected, as refineries basically increased gasoline production as the summer driving season comes next week in the United States, with the Memorial Day weekend. Meanwhile, distillates stocks fell 2.922 million barrels, while gasoline stock added 3.606 million barrels. Market players now await crude and refined products stock data from the US Department of Energy due later Wednesday.

Crude oil prices surged considerably overnight on Tuesday, lingering near six-month highs as Iraq’s OPEC governor stated concerns regarding the country’s slowing output, helping ease supply levels from near record highs.

Iraq OPEC governor Falah Alamri pointed out that nationwide output is wavering around 4.5 million barrels per day, amid weakening production due to unfavorable weather, maintenance problems and several power outages. Moreover, Alamri said that the nation’s output has been hurt by a pause in production among various oil fields in the northern Kirkuk region, which isaccountable for pumping 170,000 barrels per day.

In January, Iraq’s production rose to a record-high of 4.7 million barrels per day, roughly 3.9 million barrels of which was exported by the Persian Gulf oil power. Despite the recent decline, Alamri explained that growth is expected in the near future.

On the other hand, Iraq minister of industry and minerals Mohammed al Daraji said that it needs oil prices to reach approximately $65 a barrel in order to fill the needed budgetary gaps.The country received a $5.4 billion loan from the Intenational Monetary Fund last week, conditioned on the assertion that their government works on trimming a $20.5 billion budget.

OPEC Meeting to Focus on Dialogue

According Kuwait’s acting oil minister, the OPEC does not anticipate any systematized action to be decided during the organization’s upcoming meeting in Vienna on June 2.

The “focus of the meeting will be to think and look around… about what could be done further to stabilize the markets,” Anas al-Saleh stated on the sidelines of a Kuwait-Japan business seminar.

A previous plan to agree on measures to balance soaring oil production, that weighed down crude oil prices by over 70 percent between 2014 and 2016, failed during producer meetings in April.

At the April meeting, OPEC adversaries Saudi Arabia and Iran could not agree on the terms, fueling criticism that the producers’ cartel had lost its ability to respond.

“The expectation is to have more dialogue between OPEC members, and then from that we will be able to determine what would be the proper action going forward,” al-Saleh said.

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